ADB Approves Fiscal Stimulus Loan To Philippines

by Mary Swire, Tax-News.com, Hong Kong

28 August 2009

The Asian Development Bank (ADB) has approved a USD500m short-term fiscal stimulus loan for the Philippines - the first loan approved under ADB's Countercyclical Support Facility (CSF) arrangements.

The USD3bn CSF, established in June 2009, supports ADB's developing member countries that need to increase fiscal spending to counter the global economic crisis. To be eligible to access the CSF, countries must be adversely affected by that crisis, demonstrate sound macroeconomic policies, and have a counter-cyclical program in place.

According to ADB, besides the Philippines, the following countries have requested CSF allocations: Bangladesh, Indonesia, Vietnam, Kazakhstan, Pakistan and Sri Lanka.

In a press release, ADB said that the loan to the Philippines will help close that government's budget financing gap for this year. “It is designed to support the government's countercyclical expenditure program in its 2009 budget,” the release continued, “which includes labour-intensive infrastructure projects, and the scaling up of the conditional cash transfer program, among other crisis mitigating programs.”

"This loan is critical for the Philippine government to stimulate the economic recovery, protect its social spending and poverty reduction programs, and continue with its longer-term development objectives in 2009," said Arjun Thapan, Director General of ADB's Southeast Asia Department. "It is designed to maintain momentum of the country's key development efforts by expanding the fiscal space at a challenging time for the global economy."

It was confirmed that the loan will have a five-year repayment term, with a three-year grace period, and will cost around 2% over ADB’s financing cost. The pricing reflects interest margins prior to the onset of the global economic crisis.

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